Editorial Analysis 4 July

POLITY

Factory accidents, a pointer to rusty inspection reform

Source: The Hindu

Context

• Industrial safety issues such as factory accidents in India highlight poor enforcement of safety regulations. Moreover, existing deficiencies in the Labour Inspection System necessitate significant reforms to align with international standards and ensure worker safety.

Details

What is the issue?

• The recent Dombivli factory explosion in May 2024 has raised the concerns about industrial accidents and poor safety standards in India.

Reasons for the cause

• Increasing use of unregistered boilers.
• Lacking enforcement of safety regulations.
• Lack of adequate inspections from the enforcement departments and low prosecution rates.
• Insufficient monitoring due to high workload per inspector.

Existing regulatory norms

• Constitutional Provisions:
  • Article 21 (Right to Life), Article 41 & 48 (Directive Principles for safe working conditions).
• Regulations:
  • The Factories Act, 1948, is enacted for the health, safety and welfare of workers in factories in India.
• Supreme Court Judgements:
  • Rural Litigation and Entitlement Kendra vs. State of UP (1988) & M.C. Mehta vs. Union of India (1987) have recognised the right to live in pollution free environment under Article 21.

Reforms required

• Strengthening of labour inspection system with adequate staff and resources.
• Increased inspection rates and prosecution for violations may have reduce industrial accidents.
• Strictly opposing online inspections and self-certifications that violates International Labour Organization (ILO) standards.

International Standards

• Strict adherence to ILO's Labour Inspection Convention (1947).
• Implementation of best practices enshrined under ILO's Occupational Safety, Health and Working Conditions (OSH) Code 2020, especially conventions like 187 and 155.

Way forward

• Providing worker compensation or rehabilitation and enhancing enforcement machinery.
• Setting national standards that are aligned with international norms.
• Promoting safe and clean technology and phasing out all the hazardous materials in work environment.
• Creating awareness among community and promotion of Safety, Health & Environment (SH&E) education in schools.

Conclusion

• Effective labour inspection and enforcement are crucial for improving industrial safety. And also, the commitment from all stakeholders is essential for achieving national safety and health goals in India.

Sources:

The Hindu

ECONOMY

An unexpected bounty

Source: Indian Express

Context

• The Indian government received a large dividend from RBI. Economists argues that the government should use the money to reduce deficit instead of increasing spending.

Details

RBI Surplus Transfer

• The RBI has approved a surplus transfer of Rs 2.11 lakh crore to the Central Government for 2023-24 which is highest on record.
• It is expected to improve the government's fiscal position which allows for increased capital expenditure or faster fiscal consolidation.

What FRBM Act Says

• The act provides fiscal discipline by limiting government deficits such as medium-term deficit of 3% of GDP for the central government.

India's Fiscal Situation

• Average deficit India maintained since 2000-01 to 2019-20 is more than the limit set by FRBM.
• Moreover, pandemic has impacted the deficit at it rose to 9.2% of GDP in 2020-21.
• However, during post-pandemic period India set for the target of 5.1% deficit for 2024-25 with total debt over 80% of GDP.

Historical Context

How Does RBI Earn

• The RBI earns profits from domestic and foreign investments such as bonds or treasury bills, income from government securities, short-term lending and management commissions.

Bimal Jalan Committee on Economic Capital Framework (ECF)

• Purpose:
  • To review the framework for sharing RBI’s surplus with the government.
• Key Recommendations:
  • Clear distinction between realised equity and revaluation balances.
  • Adopting Expected Shortfall (ES) methodology for measuring market risk.
  • Maintaining Contingent Rist Buffer (CRB) within the limit of 6.5% to 5.5% of RBI's balance sheet.
  • Target should be in the level of realized equity rather than total economic capital.

Surplus Transfer in Practice

• In India, surplus transfer amounts are negotiated with the government initially. And similar practices exist in the UK and US
• However, in Japan, government unilaterally decides the transfer amount.
• Average global surplus transfer is around 5% of GDP.

Conclusion

• The Bimal Jalan Committee's guidelines provide a structured approach to RBI's surplus transfer to balance fiscal responsibility, risk management and economic stability. However, effective implementation is crucial for maintaining India's financial health and supporting sustainable economic growth.

Sources:

Indian Express